WPP Third Quarter Trading Update 2017

31 October, 2017


  • Third quarter reported revenue up 1.1% at £3.649 billion, up 0.8% at $4.780 billion, down 4.2% at €4.067 billion and up 9.3% at ¥531 billion
  • Third quarter constant currency revenue down 0.4%, like-for-like revenue down 2.0%
  • Third quarter constant currency net sales up 0.9%, like-for-like net sales down 1.1%
  • Nine months reported revenue up 8.9% at £11.053 billion, flat at $14.107 billion, up 0.4% at €12.676 billion and up 3.3% at ¥1.578 trillion
  • Nine months constant currency revenue up 1.1%, like-for-like revenue down 0.9%
  • Nine months constant currency net sales up 1.7%, like-for-like net sales down 0.7%
  • Nine months reported operating margin up 0.1 margin points, flat in constant currency, up 0.1 margin points like-for-like
  • Preliminary quarter 3 revised forecast indicates like-for-like revenue growth, net sales growth and constant currency operating margin broadly flat for the year
  • Average constant currency net debt up by £519 million for the first nine months of 2017 to £5.036 billion, primarily reflecting continued significant acquisition activity and share buy-backs
  • Net new business of $6.363 billion in first nine months compared to $5.374 billion in the same period last year, with the Group leading net new business league tables
  • Share buy-backs of £396 million in the first nine months, up from £342 million in the same period last year, representing 1.9% of the issued share capital, against a full year target of 2.0-3.0%

Revenue analysis
£ million 2017 ∆ reported ∆ constant1 ∆ LFL2 Acquisitions 2016
First quarter 3,597
16.9%
3.6% 0.2% 3.4% 3,076
Second quarter 3,807
10.0%
0.3% -0.8% 1.1% 3,460
First half 7,404
13.3%
1.9% -0.3% 2.2% 6,536
Third quarter 3,649 1.1% -0.4% -2.0% 1.6% 3,611
First nine months 11,053 8.9% 1.1% -0.9% 2.0% 10,147


Net Sales analysis
£ million 2017 ∆ reported ∆ constant1 ∆ LFL2 Acquisitions 2016
First quarter 3,100 18.5% 4.8% 0.8% 4.0% 2,616
Second quarter 3,262 9.5% -0.2% -1.7% 1.5% 2,978
First half 6,362 13.7% 2.2% -0.5% 2.7% 5,594
Third quarter 3,190 2.4% 0.9% -1.1% 2.0% 3,114
First nine months 9,552 9.7% 1.7% -0.7% 2.4% 8,708

1 Percentage change at constant currency exchange rates
2 Like-for-like growth at constant currency exchange rates and excluding the effects of acquisitions and disposals



Quarter 3 and first nine months highlights
  • Reported quarter 3 revenue growth of 1.1% in sterling, with constant currency down 0.4%, 1.6% growth from acquisitions and 1.5% from currency. The latter reflects the comparative strengthening of the pound sterling against most currencies, compared with the first half, as we are now lapping the impact of the weakness in the pound sterling, following the United Kingdom vote to exit the European Union in June 2016
  • Reported quarter 3 net sales growth of 2.4% in sterling, with constant currency growth of 0.9%, 2.0% growth from acquisitions and 1.5% from currency
  • Constant currency revenue growth in quarter 3 in the United Kingdom and Western Continental Europe and advertising and media investment management, with particularly strong growth geographically in the United Kingdom and sub-regions Canada, Latin America, the Middle East and Central & Eastern Europe. Functionally, advertising and media investment management, branding & identity and parts of the Group’s specialist communications businesses were also stronger
  • Like-for-like net sales in quarter 3 were down 1.1%, an improvement on the second quarter and compared with -0.5% in the first half, with the gap compared to revenue growth in the third quarter widening compared to the first half, but narrower than last year, as the Group’s investment in technology continued to enhance the growth of advertising and media investment management net sales and as data investment management direct costs have been reduced
  • Reported operating profits in the first nine months up strongly on last year with operating margins up 0.1 margin points. On a constant currency basis operating profits were up slightly, with flat comparative operating margins and like-for-like operating margins up the same as reported
  • Average net debt for the first nine months increased by £519 million to £5.036 billion compared to last year, at 2017 constant rates, continuing to reflect significant net acquisition spend and share repurchases of £1.218 billion in the twelve months to 30 September 2017, compared with £846 million in the previous twelve months, which, together with increased dividends of £144 million over the same period, more than offset improvements in working capital
  • Continued net new business momentum, with wins of $2.117 billion in the third quarter and $6.363 billion in the first nine months, up significantly on the first nine months of last year   
  • Continued implementation of growth strategy with revenue ratios for fast growth markets and new media raised to 40-45% over the next three to four years, and currently at 30% and 40% respectively. Quantitative revenue target of 50% already achieved

Current trading and outlook
  • FY 2017 quarter 3 revised forecast will be formally reviewed in the first two weeks in November, but indicates broadly flat like-for-like revenue and net sales growth, with the gap between revenue and net sales growth narrowing further. Headline net sales operating margin improvement now targeted flat in constant currency
  • Dual focus continues despite short-term pressures | 1. Stronger than competitor revenue and net sales growth due to leading position in both faster growing geographic markets and digital, premier parent company creative position, new business, horizontality and strategically targeted acquisitions; 2. Continued emphasis on balancing revenue and net sales growth with headcount increases and improvement in staff costs to net sales ratio to enhance operating margins
  • Long-term targets | Above industry revenue and net sales growth due to geographically superior position in new markets and functional strength in new media, in data investment management, including data analytics and the application of new technology, creativity, effectiveness and horizontality; improvement in staff cost to net sales ratio depending on net sales growth; net sales operating margin expansion of 0.3 margin points or more on a constant currency basis, with an ultimate goal of almost 20%; and headline diluted EPS growth of 10% to 15% p.a. from revenue and net sales growth, margin expansion, strategically targeted small and medium-sized acquisitions and share buy-backs



For further information:

Sir Martin Sorrell }
Paul Richardson }
Lisa Hau }              +44 20 7408 2204
Feona McEwan }
Chris Wade }

Kevin McCormack  }
Fran Butera          } +1 212 632 2235

Juliana Yeh            +852 2280 3790

This announcement has been filed at the Company Announcements Office of the London Stock Exchange and is being distributed to all owners of Ordinary shares and American Depository Receipts. Copies are available to the public at the Company's registered office.
 
The following cautionary statement is included for safe harbour purposes in connection with the Private Securities Litigation Reform Act of 1995 introduced in the United States of America. This announcement may contain forward-looking statements within the meaning of the US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially including adjustments arising from the annual audit by management and the Company's independent auditors. For further information on factors which could impact the Company and the statements contained herein, please refer to public filings by the Company with the Securities and Exchange Commission. The statements in this announcement should be considered in light of these risks and uncertainties.


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